Correlation Between Barnes and Givaudan

Can any of the company-specific risk be diversified away by investing in both Barnes and Givaudan at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Barnes and Givaudan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Barnes Group and Givaudan SA ADR, you can compare the effects of market volatilities on Barnes and Givaudan and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Barnes with a short position of Givaudan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barnes and Givaudan.

Diversification Opportunities for Barnes and Givaudan

-0.74

Correlation Coefficient

Barnes  Givaudan

Pay attention - limited upside

The 3 months correlation between Barnes and Givaudan is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Barnes Group and Givaudan SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Givaudan SA ADR and Barnes is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Barnes Group are associated (or correlated) with Givaudan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Givaudan SA ADR has no effect on the direction of Barnes i.e., Barnes and Givaudan go up and down completely randomly.

Pair Corralation between Barnes and Givaudan

Taking into account the 90-day investment horizon Barnes is expected to generate 1.15 times less return on investment than Givaudan. In addition to that, Barnes is 1.8 times more volatile than Givaudan SA ADR. It trades about 0.03 of its total potential returns per unit of risk. Givaudan SA ADR is currently generating about 0.05 per unit of volatility. If you would invest  6,423  in Givaudan SA ADR on September 3, 2024 and sell it today you would earn a total of  2,372  from holding Givaudan SA ADR or generate 36.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Barnes Group  vs.  Givaudan SA ADR

Barnes Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Barnes Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental drivers, Barnes sustained solid returns over the last few months and may actually be approaching a breakup point.

Givaudan SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Givaudan SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Barnes and Givaudan

The main advantage of trading using opposite Barnes and Givaudan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barnes position performs unexpectedly, Givaudan can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Givaudan will offset losses from the drop in Givaudan's long position.

The idea behind Barnes Group and Givaudan SA ADR pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.